Economic policy uncertainty, credit risks and banks’ lending decisions: Evidence from Chinese commercial banks

By Qinwei Chi, Wenjing Li. 2017

214 citations recorded by the source corpus.

Abstract Using data for Chinese commercial banks from 2000 to 2014, this paper examines the effects of economic policy uncertainty (EPU) on banks’ credit risks and lending decisions. The results reveal significantly positive connections among EPU and non-performing loan ratios, loan concentrations and the normal loan migration rate. This indicates that EPU increases banks’ credit risks and negatively influences loan size, especially for joint-equity banks. Given the increasing credit risks generated by EPU, banks can improve operational performance by reducing loan sizes. Further research indicates that the effects of EPU on banks’ credit risks and lending decisions are moderated by the marketization level, with financial depth moderating the effect on banks’ credit risks and strengthening it on lending decisions.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d89ac59994f1f752cc056dbe86719268be7d591d

Citations in the corpus

• The impact of economic uncertainty and geopolitical risks on bank credit (2021, unknown): “We control for a set of bank-specific characteristics following the literature (Chi and Li, 2017; Hu and Gong, 2019; Nguyen et al., 2020; Bordo et al., 2016).”
• Policy uncertainty and loan loss provisions in the banking industry (2020, unknown): “Such predictions are in keeping with anecdotes about PU’s 3 For example, using Chinese commercial banks as a sample, Chi and Li (2017) document a positive relation between policy uncertainty and banks’ credit risks.”